Triads and Tribulations of Winter 22/23
What are Triads?
Triads are the three half-hour settlement periods with the highest system demand between November and February, separated by at least 10 days. Through forecasting, asset operators and large energy consumers create avoidance behaviour, which in turn makes prediction more difficult. Furthermore, minor differences in forecast demand may lead to consecutive days of Triad avoidance. After the Triad season, NGESO publishes these three Triad periods for which some grid users are then charged based on their consumption during these Settlement Periods using a predetermined rate. In short, Triads exist to incentivise people to reduce their energy consumption during these periods to minimise peak grid demand.
Big takeaways for 2023
National Grid ESO recently announced the 22/23 Triads on the following days:
· 2 Dec 2022 (39,573 MW)
· 15 Dec 2022 (44,561 MW)
· 17 Jan 2023 (42,022 MW)
The Peak demand on December 2nd Triad was the lowest ever recorded, coming in at just under 40GW! This particular day was also a Friday – only the second ever to be a Triad.
This year’s dates barely exceeded the peak demand of adjacent days on the scale of 100s of megawatts, meaning any battery action could have shifted the final Triad day and timing.
How did Open Energi perform this Triad Season?
Open Energi (OE) successfully predicted all three Triads and captured two of them with full export dispatches across our portfolio, earning a significant revenue uplift in the process. The December 2nd peak demand shifted to a later settlement period than expected by most. According to Modo Energy, only a single battery across the whole GB fleet captured that period with an export capacity of over 50%.
OE‘s Hill Farm asset ranked 4th position on Modo’s Triad leader board, which plots the capture rate on a per-MW basis. By optimising across all revenue opportunities, OE also set the clearing price for Dynamic Containment on 7th February (£61.36/MW/h) by calculating the opportunity cost for this asset based on the probability of that day being a Triad. This opportunity cost may have been seen differently for other asset configurations and locations (i.e., prices) but ended up benefitting operators that chose to bid into Dynamic Containment rather than optimising only to capture a potential Triad.
What are the complexities surrounding Triad prediction and avoidance?
The Triads were particularly difficult to predict this year for several reasons:
· Gas prices driving the energy prices (causing demand reduction);
· Embedded renewables generation deviating from forecasts;
· Mild weather over the winter, particularly throughout November.
In addition to the above, the OE-operated Hill Farm BESS has a 1.2-hour duration, meaning the discharge period needs to be more precisely timed (in contrast to 2-hour duration batteries having a margin for error thanks to their ability to discharge across the whole evening peak), as was the case on 2nd December.
The final piece of the puzzle is locationality, as the payments for exporting during a Triad period vary depending on the DNO region the battery operates in. Out of the 14 DNO regions in the UK, only 8 receive Export Triad rates. For example, the Embedded Export Tariff rate for Midlands (where Hill Farm is located) is around £2.7/kW, below the UK average of £3/kW.
This becomes important when pricing Triad avoidance compared to the opportunities available in other markets. For example, the demand profile on January 23rd signalled a Triad possibility, but Open Energi’s Hill Farm battery secured a DCL contract valued at £45/MW/h, opting for revenue certainty over a riskier but more lucrative Triad avoidance attempt. The graph below shows how the battery fleet responded to a possible Triad on that day, across quartiles of max power dispatched (as % of max MEL measured on the day).
Only around 15% of the BESS fleet dispatched at more than 70% of their maximum export power over that period, signalling that most batteries were valuing alternative revenue opportunities higher. Only assets with higher export price benefits are likely to have favoured a Triad dispatch over other options. If the Triad export price was higher for the Midlands region, OE’s optimiser may have priced-out of Dynamic services due to an increased opportunity cost.
Are Triads here to stay?
National Grid ESO has announced they will be phasing out the Triads mechanism from 2023 onwards. This will erode a potentially large revenue stream for batteries located in the Southwestern, Southern, and London DNO regions, but the reform’s effects will be less impactful elsewhere.
It will be interesting to observe next winter’s demand profile to see how effective Triads have been at winter peak shaving, and where optimisers choose to seek alternative revenue opportunities if Triad export benefits continue to be squeezed.